Where would you rather be to ride out this current pandemic and possible future ones: In an overcrowded city breathing the same air as hundreds of others or out on your boat?
We don't need to wait for an answer, as the proof is in the pudding: Boat sales and boat rentals have soared during COVID-19. And with that, so have real estate prices for homes with a boat dock. These homes have traditionally been expensive, depending mainly on where they are, but now they're becoming unaffordable except for a certain class of people -- the ones who can pay millions of dollars for a boat-dock-equipped home.
People are becoming boaters
A rather tone-deaf WSJ article that would make even the most steadfast capitalist squirm describes the conundrums of wealthy people: Should they spend $4.4 million for a home or wait until they can perhaps get it for $3.5 million? Is a 5,000-square-foot waterfront home going to be big enough? Or perhaps a buyer considers going the cheap and convenient route, spending around $1 million and buying virtually, as long as the home has a boat dock, of course.
All this is happening while mom-and-pop landlords across America are at risk of losing their rental properties due to eviction moratoriums that keep getting extended to prevent a wave of homelessness from happening since working people have lost their jobs during this pandemic.
Nonetheless, there are lessons to be learned and money to be made, and if you, as a real estate investor, can get your hands on a house with a boat dock, your place will be in high demand.
The boating situation
People are buying boats like they've been buying Pelotons and work-from-home desks during the pandemic -- to the point that marinas have no more inventory and are even pre-selling boats that people haven't even gotten to see. And these boats aren't cheap. Like houses and cars, they're even more expensive now -- to the tune of about 30% more expensive -- due to demand created from COVID-19. (Boating is a great way to social distance.)
If people can't afford a boat, that's no problem. Boat loans are becoming a thing. Before COVID-19, boat loans represented 0.07% of loans. As of March, they were up to 0.34%, a higher percentage than loans for engagement rings and vacation loans. Boat rentals are also up tremendously. A marketplace for boat rentals, GetMyBoat, reports a 3,900% increase in boat rentals from April to July 2020, and that interest is holding strong for 2021.
People want a home with a dock
Once people have a boat, it's only natural to start imagining themselves owning a home where they can dock that boat. So for now, coastline property is worth a lot of money because of increased demand. But with all the new interest in boating, a property with a boat deck could make for prime vacation rental property.
Before you start looking for that next deal, consider first the cost of the home, of course, but also the increased risk levels you have with waterfront property. Storms have been getting more severe across the country, and sea levels are rising from climate change, making flooding an even bigger risk than it already is. Older homes are often cheaper because they tend to be built at lower elevations. But they're at higher risk for flood damage, and people increasingly want homes that are built on higher ground.
The Millionacres bottom line
Tempting as it might be to buy a home with a boat dock, investors should be cautious about buying a home at the top of the market and thereby paying too much. You could get yourself underwater by doing that, and we don't mean flood water, we mean possibly owing more than the property is worth if you buy high and prices drop.